In an assignment for Economics class, regarding Economics in Sports, what are some macroeconomic issues in Professional Sports?

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Ashley Kannan | Middle School Teacher | (Level 3) Distinguished Educator

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I think that one significant macroeconomic issue in sports would have to do with inflation.  The rising costs of sports management has contributed to a rate of spending that is inflationary.  Economic principles are not guiding team payrolls, especially with regards to free agency.  The money spent on players and player contracts cannot sustain the economic system.  Given how teams are more concerned with locking up players for long term contracts and "outspending" the competition, there is an inflationary trend present in sports management.  The norm of developing a farm system that can help to provide future talent at low costs while maintaining athletic competitiveness has given way to the "quick fix" of free agency spending.  An example of this would be the New York Yankees' approach to free agency spending:

With the $189 million luxury tax threshold and the massive benefits it potentially offers hanging over their heads, the Bombers must decide between fiscal responsibility and contending next season....Mark Newman... has come under considerable criticism this season for the system’s failure to develop any frontline starting pitchers and the lack of any impact position players. Damon Oppenheimer... has also been under fire for the Yankees’ recent performance in the draft.

The Yankees are just one example of the macroeconomic issue facing many sports franchises regarding inflation, runaway spending via free agency, and the lack of fiscal restraint while maintaining a competitive team.

Another macroeconomic issue which is present in sports connects to the rising costs to fans.  While sports teams engage in runaway spending, personal disposable income for fans has proven to be a challenge.  The cost of attending a football, basketball, or baseball game for a family of four is not small.

Lifelong Cubs fan and Grand Rapids, Mich., resident Joel Hilgendorf, 37, said, “It’s everything. Taking the wife and three kids to a pro sports game is impossible."  Asked how many pro sports events he has been to, Hilgendorf said, “Haven’t been to one in three years. Minor league, maybe five a year. That really makes me sad.” 

This is a macroeconomic issue because if the rising costs of sports causes families to be "priced out," a consistent source of income will become absent. Determining how to manage the costs of attending sporting events for families who are economically challenged given economic conditions becomes another macroeconomic issue in sports.  

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